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Eric Cantor's Ancient Endeavor

02/07/2013 12:14 pm ET | Updated Apr 09, 2013

Eric Cantor, the House Majority Leader, wants to change how voters see Republicans. Polls show that Americans believe Republicans are far too negative. To change this, Cantor is putting more emphasis on Republican ideas that he thinks voters might like. He is talking about more school choice, cutting taxes on medical devices, more job training, closing tax loopholes, and more visas for highly skilled immigrants. Cantor would have voters believe that this "positive" program is really what Republicanism is about. He also would have voters believe that these tweaks plus the usual but downplayed Republican talk about reducing budget deficits will create jobs for millions of people still out of work and reduce the $1 trillion annual output gap.

Steering the Republican Party away from its accustomed negativism is an ancient endeavor. Henry Simons, a founder of the ardently free enterprise Chicago School, tried unsuccessfully to do so in the 1930s. His "Positive Program for Laissez Faire" is a model for the kind of big things a truly positive pro-enterprise party could favor but Cantor won't touch.

Simons was appalled by the central policy idea of the early New Deal, the National Recovery Act. The NRA would have drastically reduced economic freedom and competition by cartelizing over 600 industries, reducing competition and therefore innovation in the whole U.S. economy. Simons was not opposed to everything the New Deal wanted to do, however. To the contrary, he urged his fellow partisans to differentiate themselves from "the horde of reactionaries" opposing every New Deal effort to use government to promote employment and close the yawning output gap.

He blamed the Great Depression, as did the New Dealers, on the excesses of the private financial system and on the failure of government and the Federal Reserve during the 1920s to safeguard the country's financial stability. The government had to provide this stability Simons believed because the private financial system was "money bootlegging" masquerading behind "sanctimonious respectability and marble solidity."

Simons extolled the freedoms and economic benefits that come from competitive enterprise even at the depths of the Depression. He was deeply fearful of Keynesians and others who talked of planning and who he thought had lost faith in the system. Like the Keynesians, on the other hand, he emphatically supported government spending -- stimulus -- to get the country back to work. One of his heresies was that he thought governments should "issue" the money needed to pay for these job-creating programs, not borrow it as the Keynesians were recommending. Simons other heresy, perhaps the one today's Republicans would find most objectionable, was the belief that the government should use taxation to reduce income inequality which was depressing recovery.

Simons was an unorthodox, creative champion of competitive enterprise. Cantor and other Republicans today never cite him as a result. Like so many other thinkers, he has been written out of the Republican conversation. He was telling his party a truth they did not want to hear -- that the American economy cannot be healed without major financial reforms and government spending to rebuild employment and close the output gap. The unchanging Republican myth that denies the important role of government in anything but defense is why Cantor and his party are irredeemably negative no matter how hard they try to disguise it.